Markets Overview: (Source: Bloomberg, FT, Reuters, DJ Newswires)

UK 100 Index called to open -40pts at 7505, having pulled back from 7-week highs of 7550 to successfully test last week’s 7500 breakout for support. Bulls need a break above 7515 to resume the August uptrend. Bears require a breach of 7500 to allow for a retrace towards 7400, extending July’s 7300-7550 shallow rising channel. Watch levels: Bullish 7515, Bearish 7500.

Calls for a negative European open comes as US-North Korean nuclear tensions rise, dampening appetite for risk assets (equities, industrial commodities) in favour of traditional safe havens (gold, silver, bonds, Japanese Yen, Swiss Franc). That said, the market has, thus far, been limited (thicker skinned) with a mixed bag in Asia overnight following small losses for Wall St’s index trio.

Cooler China inflation data adds to yesterday’s disappointing imports and exports prints but has largely been overlooked in view of the above. The same is true for both US API oil stocks data (big crude drawdown; 7.8m barrels) ahead of official data this afternoon, and 'constructive' OPEC talks, as oil prices languish around yesterday’s lows.

Japan’s Nikkei is understandably lower and underperforming, down 1.3% as safe haven seeking in the Yen hampers exporter names (IT, industrials). However, the currency is well off its 3am highs and while lower oil prices also weigh on the Energy sector.

Down under, Australia ASX is actually up 0.4%, helped by financials after Commonwealth Bank of Australia reported record profits, some welcome good news in the wake of recent money laundering allegations. Interestingly, the big Miners are higher, perhaps on the risk of tighter supply, with copper still pushing north and aluminium holding its gains, even if oil re-tests yesterday’s lows.

UK Index corporate news includes G4S reporting a rise in H1 earnings and seeing full-year revenue growth broadly in line with its medium-term 4-6% target, dividend unchanged. Vantiv has confirmed a 55p and 0.672 new shares offer for Worldpay.

After 10% annual EPS growth 2011-15, Legal & General seeks the same 2016-2020, AUM +13%, raises dividend. Premier Foods appoints Keith Hamill as Chairman (currently non-exec director at easyJet). BATS sold $17.5bn of bonds yesterday to fund its acquisition of Reynolds American.

US markets closed lower, spoiling the Dow Jones’ winning streak (first down day in 10), although it did manage another record intraday high. Sentiment was hurt by aggressive Trump rhetoric regarding North Korea, threatening significant retaliation if threatened.

Gold has benefited from overnight safe haven seeking, rallying back to test August falling highs of $1267, reversing yesterday’s weakness after the USD rallied on jobs data supportive of further Fed rate hikes. Will prices break higher or reverse and retrace?

Crude Oil prices remain depressed, hugging yesterday’s lows on account of 1) nuclear tensions, 2) USD strength, 3) more disappointing China data, 4) little to show from the OPEC meeting and in spite of a solid API inventory report last night.

Today’s calendar focus will be limited to afternoon when we get US Q2 Non-Farm Productivity and Labour Costs (both 1.30pm), the former forecast higher after a flat Q1 while growth in the latter slows. US Wholesale Inventories (3pm), by contrast, may highlight an acceleration in growth

Then it’s all about US Weekly Oil Inventories (3.30pm), the source of much excitement over the last few weeks. Following last night’s API drawdown for Crude, will we hear the same this afternoon? Or will we get a build that serves to rekindle nerves about the global supply glut and send prices lower? Or will the focus be on gasoline and/or distillates again, or US production?

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